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Homework. Due for class next Monday 11/29 Homework: 10-63 (Create cash budget), 10-69, 10-73 Supplemental problem(s) posted to Blackboard Final Exam take-home portion (submitted to digital drop box by 9am). Ch 10 Budgets and Variance Analysis.

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Homework

Homework

Due for class next Monday 11/29

Homework: 10-63 (Create cash budget), 10-69, 10-73

Supplemental problem(s) posted to Blackboard

Final Exam take-home portion (submitted to digital drop box

by 9am)


Ch 10 budgets and variance analysis

Ch 10 Budgets and Variance Analysis


Budgeting process estimate sales estimate cogs establish ending inventory amounts

Budgeting Process:Estimate salesEstimate COGSEstablish Ending Inventory Amounts


Homework

Estimate Collection and Payment PatternsProject collections, disbursements, and ending cashDetermine borrowing and payments patterns


Budget schedules

Budget Schedules

Cash Collections

Inventory Purchases

Cash Disbursements for Inventory

Cash Disbursements for S&A

Cash Budget


Example data

Example Data


Example con t

Example (con’t)

25% sales collected in current month, remainder following month

AR @ Sept 30 = $45,000

50% inventory purchases paid for in current month

Remainder following month

AP @ Sept 30 = $25,000


Example con t1

Example (con’t)

Monthly salaries: $15,000

Monthly S&A exp.: $1,200

paid as incurred

Cash @ Sept 30 = $32,000

Other Cash expenditures:

Dividend $2,000 in Oct.

Equipment $30,000 in Nov.


Example con t2

Example (con’t)

Credit line of $500,000

Borrowing and repayment in $1,000 increments

12% interest rate

Maintain $10,000 bal EOM in checking Begin borrowing balance: $0


Variance analysis

Variance Analysis

Actual Price = AP

Actual Quantity = AQ

Standard Price = SP

Standard Quantity = SQ


Variance analysis con t

Variance Analysis (con’t)

(AP*AQ)-(SP*SQ) = Total Variance

Price Variance

(AP*AQ)-(AQ*SP)=

(AP-SP)*AQ

Quantity Variance

(AQ*SP)-(SP*SQ)=

(AQ-SQ)*SP


Variance analysis con t1

Variance Analysis (con’t)

Total Variances: Material, Labor, VOH

Each total variance is broken down into price and quantity variances

Favorable = Actual less than Standard


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